Out-Law News 2 min. read

House competition avoids legal uncertainty by having free entry


The operators of a win-a-house competition have stayed on the right side of gambling laws by not charging for entry, according to a gambling law expert. The couple hopes to earn money from selling advertising on the website carrying the competition.

A number of people who could not sell their houses have tried to run schemes online in the last year that involved selling tickets for entry into a draw to win the house.

The operators of the competitions asked one or a number of questions and claimed that the schemes were 'prize competitions' which are legal and are not governed by the Gambling Act or regulated by the Gambling Commission.

But Antoinette Jucker, a gambling law expert at Pinsent Masons, the law firm behind OUT-LAW.COM, said that many of such competitions were in fact illegal lotteries because their questions were too easy and did not involve the exercise of skill or judgment required to qualify as a prize competition.

Michelle and Paul Wood of Yorkshire have launched a similar scheme but have made it free to enter. They claim the house they are giving as a prize is worth £425,000 and hope to raise £900,000 by selling advertising on the site between November and February.

Jucker said that the Woods' competition should not face the same legal problems as the competitions that charged for entry.

"I think the basic concept is very clever," she said. "I think it's not a lottery under the Gambling Act because the entrants aren't required to pay to enter. Even if the questions are very straightforward it wouldn't matter because to be a lottery there needs to be a payment to enter."

"Free prize draws are unregulated by the Gambling Act. That said, if there's any other payment to participate, such as paying stamp duty land tax, that could bring the competition within the Gambling Act's definition of a lottery – assuming the questions are straightforward," she said.

The Woods say that they will use the money to pay off business debts. "In order to legally raise enough money to give the house away and pay all our creditors, without anything left for our selves we need to raise £900,000 in advertising (of which £200,000 will be VAT, Paypal, legal (we intend to acquire a solicitor) and some other costs then after paying for the house," said a statement from the couple on the website.

The couple said that, though, that if the competition does not raise £900,000 by the current closing date they will extend that. If it still does not raise the money they need they may replace the prize with a less valuable one, they said. That could be a cash prize with no set lower limit.

"If however, we do not reach enough to cover everything the winner will A.  Receive a lessor [sic] property and cash prize up to but no more than the value of the intended prize. B.  win a lessor valued property C. win a cash prize that being an amount of money from that received after VAT, operating costs, expenses and charity gifts but not to a greater value than the intended property," said the couple's website.

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